American Nat. Bank and Trust Co. v. Young, C9-82-258.

• Decision Date: 04 February 1983
• Docket Number: No. C9-82-258.,C9-82-258.
• Citation: 329 NW 2d 805
• Parties: AMERICAN NATIONAL BANK AND TRUST COMPANY, Respondent, v. Terry Robert YOUNG, Defendant, Avemco Insurance Company, Appellant.
• Court: Minnesota Supreme Court

329 N.W.2d 805 (1983)

AMERICAN NATIONAL BANK AND TRUST COMPANY, Respondent, v. Terry Robert YOUNG, Defendant Avemco Insurance Company, Appellant.

No. C9-82-258.

Supreme Court of Minnesota.

February 4, 1983.

Wolk & Jacob and Arthur Alan Wolk, Philadelphia, Pa., Dean K. Johnson, Bloomington, for appellant.

Geraghty, O'Loughlin & Kenney, Terence O'Loughlin and Richard J. Thomas, St. Paul, for respondent.

Heard, considered and decided by the court en banc.

TODD, Justice.

An individual claiming to be Terry Robert Young borrowed $225,000 from the American National Bank to purchase an airplane. Avemco Insurance Company furnished insurance coverage on the airplane, including a "Breach of Warranty Endorsement." The airplane was flown to Colombia where it was seized by the Colombian government. American National Bank, relying upon a deposition of Young in which he denied owning or financing the airplane, recovered $196,924.31 under a blanket bond. American subsequently sued Avemco seeking recovery of $221,924.31, the balance due on the note. American agreed that it would reimburse that portion of its recovery which the insurance company had paid under the bond. The trial court allowed recovery against Avemco for the full amount claimed, plus prejudgment interest. We affirm.

The facts are found in a written stipulation of the parties, together with exhibits received in evidence. The stipulation exclusive of attached exhibits provides:

1. Plaintiff American National Bank and Trust Company is a national banking association organized and existing under the general banking laws of the United States, its principal place of business being in the City of Saint Paul, Minnesota. Defendant Terry Robert Young is a resident of Raleigh, North Carolina. Defendant Avemco Insurance Company is a Maryland corporation duly licensed and registered with the Minnesota Commissioner of Insurance to do business in the State of Minnesota.

2. On or about October 1, 1978, a person identified as Terry Robert Young, made formal application with plaintiff in Minnesota for a loan in the amount of $225,000.00 to purchase a 1977 Cessna 404 Tital Ambassador II airplane having FAA Registration No. 37125 and Aircraft Serial No. 404-0113. As a condition of the loan, plaintiff required Young to obtain an aircraft insurance policy, including a so-called Breach of Warranty Endorsement.

3. On October 2, 1978, the involved aircraft was sold by Sky Sales and Service, Inc., Oklahoma City, Oklahoma, to Terry Robert Young of Raleigh, North Carolina, a copy of the Bill of Sale being attached as Exhibit "A".

4. On or about October 4, 1978, Avemco forwarded to plaintiff its Telex Binder of coverage on the aircraft in the amount of $280,000.00, effective October 3, 1978, with a "Breach of Warranty in your favor", a copy of which Telex Binder is attached as Exhibit "B". On or about October 4, 1978, Avemco issued to plaintiff its Aircraft Insurance Temporary Binder No. 23759A, affording insurance coverage for the period from October 3, 1978 to October 19, 1978, a copy of which is attached as Exhibit "C".

5. On October 4, 1978, plaintiff loaned to Young, for the purchase of the aircraft, the sum of $225,000.00 to be repaid in monthly installments over a period of six years, with interest at 3% per annum over plaintiff\'s prime loan rate for short term borrowing, which rate would fluctuate with plaintiff\'s prime rate. A copy of the Promissory Note dated October 4, 1978 is attached as Exhibit "D". To secure the loan, plaintiff obtained and duly perfected a security interest in the aircraft, a copy of the Security Agreement being attached hereto as Exhibit "E".

6. On October 11, 1978, the aircraft was seized in Baranquilla Province, Colombia (which is south of the 16 degree North latitude) pursuant to Decision No. 0675 of 1978 of the Governor, Department of Atlantico, Republic of Colombia. A copy of the official U.S. Department of State\'s translation of said Decision is attached as Exhibit "F".

7. In early November 1978, Avemco received an Application for insurance purporting to have been signed on October 30, 1978 by Terry Robert Young, a copy being attached as Exhibit "G".

8. On November 2, 1978, and on November 9, 1978, respectively, Avemco issued to plaintiff its confirmations of insurance coverage effective October 4, 1978, copies of which are attached as Exhibit "H". On or about November 15, 1978, Avemco sent to plaintiff its aircraft policy AVI-139460-0 for the policy period October 4, 1978 to October 4, 1979, a copy of which is attached as Exhibit "I".

9. The policy of insurance issued by the defendant Avemco Insurance Company contained a Breach of Warranty Endorsement for which Avemco charged an additional premium of $50.00.

10. On November 10, 1978, the first payment to the bank by Terry Robert Young was due. After it ran a few days past due, plaintiff\'s Vice-President, Frank L. Wimer, contacted Terry Robert Young by telephone and was told that the loan papers had been sent to Young by telephone and was told that the loan papers had been sent to Young in blank. Mr. Wimer knew at the time of his telephone call to Young that the loan papers had been filled in when sent to Young. The November 10, 1978 payment of $6,143.55 was paid on November 24, 1978, leaving principal due of $221,924.31. The substance of Wimer\'s November telephone conversation with Young was not made known at that time to Avemco.

11. The payment due December 10, 1978 to the bank from Terry Robert Young was never made.

12. Sometime prior to January 8, 1979, Mr. Wimer learned that the aircraft had been confiscated in Colombia. On January 8, 1979, Wimer contacted Young by telephone at his business and advised that the bank was aware that the aircraft was confiscated in Colombia.

13. On January 10, 1979, Mr. Wimer prepared a Memorandum indicating that plaintiff had recently learned the following concerning Young:

a. Terry Robert Young had an aircraft financed with the American National Bank, Morristown, New Jersey, which had instituted suit against Mr. Young for fraud in the financial statement, secretion of property, and delinquency on his loan. The aircraft involved was a 1968 Aero Commander twin engine aircraft;

b. The General Electric Credit Company extended sums of money to Terry Robert Young for the purchase of an Aero Commander twin engine aircraft and that aircraft had been seized and was detained in Bogata, Colombia;

c. Cessna Finance Corporation had extended credit to Terry Robert Young for a Cessna Turbo 210 single engine aircraft with no information as to whether or not the first payment had been made;

d. Commercial Credit Equipment Corporation had extended loans to Terry Robert Young for a 1977 Cessna 337 twin engine aircraft and the aircraft was subsequently repossessed.

A copy of the Memorandum is attached as Exhibit "J".

14. On March 28, 1979, plaintiff first notified Avemco of the loss of the aircraft. A copy of plaintiff\'s letter is attached as Exhibit "K".

15. Plaintiff collected $196,924.31 under a Banker\'s Blanket Bond in connection with its losses arising out of the transaction with Terry Robert Young, a copy of which bond is attached as Exhibit "L".

16. The aircraft, at the time of its loss had a reasonable value of $235,000.00.

The breach of warranty agreement referred to in the stipulated facts provides in part.

Loss, if any, under Coverage C shall be payable as interest may appear to the lienholder named in Item 8 of the declarations and this insurance as to the interest of the bailment lessor, conditional vendee or mortgagee or assignee of bailment lessor, conditional vendor or mortgagee (herein called the lienholder) shall not be invalidated by any act or neglect of the lessee, mortgagor or owner of the within described aircraft * * *

Nothing herein contained shall be held to vary, waive, alter or extend any of the terms, conditions, agreements, or warranties of the below mentioned policy, other than as above stated. * * *

Under the exclusion portion of the policy, coverage is not provided "during or in connection with a flight involving any trafficking in narcotics, drugs, or hallucinogenics or involving the unlawful importation or exportation of property or persons" or accidents or losses "due to (2) capture, seizure, arrest, restraint, or detention or the consequences thereof or any attempt thereat or any taking of the aircraft or any loss or damage thereof by any Government or governmental authority or agent (whether secret or otherwise) or by any military, naval, or usurped power, whether any of the foregoing be done by way of requisition or otherwise and whether in time of peace or war and whether lawful or unlawful * * *.

Article VIII of the Insurance Agreement's portion of the policy provides in part:

VIII. Policy Period, Territory. This policy applies only to occurrences, accidents and losses which happen during the policy period while the aircraft is within the Western Hemisphere north of 16° North Latitude (excluding Cuba) * * *.

Based on the stipulated facts and the exhibits in the record the trial court made its findings of fact and reached the following Conclusions of Law:

1. That the loss of the airplane was the result of Young\'s act or neglect.

2. That Plaintiff had an insurable interest in the airplane.

3. That Plaintiff\'s interest in the airplane was insured by the Defendant.

4. That the loss of the airplane was covered by Defendant\'s policy of insurance with Plaintiff.

Judgment was entered for plaintiff in the amount of $221,924.31 with interest from April 1, 1979. Avemco appeals.

The issues on appeal are:

1. Does the evidence support the finding of the trial court that the defendant Terry Robert Young is the person who obtained the loan and insurance involved in this case?

2. Is the "Breach of Warranty Endorsement" a separate policy of insurance?

3. Do the applicable exclusions of the policy preclude recovery under the...